This morning, the value of Bitcoin skyrocketed to a five-month high.
The price of the cryptocurrency started surging against both the dollar and the pound at around 5.30 in the morning UTC, briefly surpassing the $5,000 mark for the first time since November on some exchanges. The price rose as much as 20 percent at its peak this morning.
The surge did not seem to be driven by any news. Analysts said that it was possible that it was triggered by algorithmic trading programmes that bought after a key price level was breached. Short sellers who are buying bitcoin to cover some losses may have also contributed to the increase.
Mati Greenspan, a senior market analyst with trading platform eToro, stated: “Momentum has been gradually building in the crypto market for a few months now and it seems it finally popped.”
He added: “The break above $4,200 was critical. That level had been building up for a while now so no doubt there was a group of entry orders and stops that were triggered during the Asian session.”
Also, CEO and founder of CryptoCompare, Charles Hayter, stated: “This trigger was through volume led price action driving the price and triggering algos on a breakout.”
He added: “We’re seeing the period of 6am-7am GMT have 6m trades in the hour compared to average of c.1.5-2m, a 3-4x increase.”
Fawad Razaqzada, a market analyst at Forex.com, disclosed: “The breakout gave rise to further follow-up technical buying above this level this morning as a cluster of buy stop orders were triggered from breakout traders and some short sellers were forced to close out their bets.”
He added: “It will be interesting to see if the buyers will now be able to hold their nerve and defend this former resistance level. The next potential trouble area comes in around $5,200, a level which was support in the past.”
The price increase comes despite the recent suggestion that most of the trading activity of bitcoin is faked through activities including “wash trading.”
Last week, Greenspan, the eToro analyst, disclosed: “The key here is that all this wash trading that’s been discovered hasn’t actually affected the price of bitcoin itself in any meaningful way.”
He added: “Of the real 10 exchanges who are providing most of the liquidity in this market, nine of them are regulated and the price of bitcoin is extremely consistent among them. The fact that the price is derived directly from the market and that there’s a very low level of arbitrage between the top exchanges means that the market is even less susceptible to manipulation.”